State purchase tax on export-linked raw material upheld; export exemption could not be expanded by importing the penultimate sale fiction.

State purchase tax on locally purchased raw material used in manufacture for export was upheld because the taxable event was the purchase in the State, not the later export sale. The levy under the Haryana General Sales Tax Act was held not repugnant to the Central Sales Tax Act or Article 286, and the constitutional challenges under Articles 14, 19(1)(g) and 300-A failed because the classification between direct exporters and dealers selling through exporters was reasonable. Section 5(3) of the Central Sales Tax Act was held to be an independent deeming provision and could not be read into Section 5(1) or the State exemption scheme to extend export exemption.

---

---

Issues: (i) Whether the Haryana General Sales Tax Act provisions imposing purchase tax on goods purchased in Haryana and used in manufacture of goods ultimately exported through exporters were unconstitutional or repugnant to the Central Sales Tax Act and the Constitution. (ii) Whether section 5(3) of the Central Sales Tax Act could be treated as part of section 5(1) so as to extend export exemption to purchases connected with penultimate export sales.

Issue (i): Whether the Haryana General Sales Tax Act provisions imposing purchase tax on goods purchased in Haryana and used in manufacture of goods ultimately exported through exporters were unconstitutional or repugnant to the Central Sales Tax Act and the Constitution.

Analysis: Section 9 of the Haryana General Sales Tax Act was held to be a purchase-tax provision, the taxable event being the purchase of goods in the State and not the later sale to exporters. The provisions of sections 9, 24 and 27 were found to operate on a different incidence of taxation from section 5 of the Central Sales Tax Act. The Court held that article 286 did not bar the levy because the tax was not imposed on the export sale itself, and that the State Legislature was competent under entry 54 of List II to enact the provisions. The challenge under articles 14, 19(1)(g) and 300-A also failed, as the classification between direct exporters and dealers selling through exporters was held to be reasonable and the tax a valid fiscal levy.

Conclusion: The challenged provisions were held valid and the purchase tax levy on the petitioners was upheld, against the assessee.

Issue (ii): Whether section 5(3) of the Central Sales Tax Act could be treated as part of section 5(1) so as to extend export exemption to purchases connected with penultimate export sales.

Analysis: The Court held that section 5(1) and section 5(3) of the Central Sales Tax Act lay down separate and independent principles. Section 5(1) concerns the actual export sale or purchase by the exporter, while section 5(3) deems the last sale or purchase preceding the export occasioning sale to be in the course of export only for the purpose stated in that sub-section. The Court rejected the contention that section 5(3) is merely an extension or proviso to section 5(1), and held that the Haryana Act did not incorporate the wider deeming fiction of section 5(3) into its exemption provisions.

Conclusion: Section 5(3) could not be read into section 5(1), and the petitioners were not entitled to exemption from purchase tax on that basis, against the assessee.

Final Conclusion: The purchase tax levied by the State on the petitioners' transactions was sustained, the constitutional challenge failed, and the writ petitions were dismissed.

Ratio Decidendi: A State purchase-tax levy on the local purchase of raw material is valid where the taxable event is the purchase itself, and the exemption for export sales cannot be enlarged by importing the deeming fiction of section 5(3) of the Central Sales Tax Act into section 5(1) or into the State exemption scheme.

---